Verizon admits that its wireless margins have taken a 500-600 basis point hit because of the huge iPhone sales.

The sweet side of Apple's iPhone is well understood. The exclusivity that AT&T initially enjoyed with iPhone helped it to increase its market share and helped it compete more effectively against Verizon. Before receiving iPhone last year, Sprint openly blamed its lack of iPhone for its troubles.

The iPhone is the biggest draw for wireless telecom companies. For telecom companies, however, there is also a bitter side to the iPhone, which is not widely understood.

When a customer buys an iPhone, the carrier subsidizes the cost. It has been reported that Apple charges about $500 for its latest model, but carriers sell the phone for $199. The subsidies that other carriers provide for other phones are considerably lower than those for iPhone.

The more iPhones that a carrier sells the bigger is the hit to the bottom line. Herein lies the incentive for the carriers to promote Google Android, Microsoft Windows, and Research In Motion phones. Problem is, the iPhone seems too darn popular.

Full disclosure: I am long Apple from an average of $131. I took profits on 50% of the position at an average price of $360. Subscribers to ZYX Buy Change Alert may have a similar position and may have taken similar actions.

About Me: I am an engineer and nuclear physicist by background, have founded two Inc. 500 companies. I am the chief investment officer at The Arora Report which publishes four newsletters to help investors profit from change. Please feel free to write me at Nigam@TheAroraReport.com.